Vancouver-based industrial laser manufacturer nLIGHT released its first-quarter financial results Wednesday, posting better-than-expected numbers in light of the novel coronavirus pandemic.
Revenue for the first quarter was reported at $43.2 million, a 3.2 percent year-over-year gain, with a gross margin of 22 percent, compared with 32.3 percent in the first quarter of 2019.
nLIGHT was among the first local businesses to feel the impact of the novel coronavirus, due to the company’s large manufacturing and sales presence in China. In February, local travel restrictions delayed the resumption of operations at nLIGHT’s Shanghai manufacturing facility following the Chinese New Year holiday in February.
nLIGHT’s end-of-year 2019 financial report predicted that the company would take an $8 million hit compared with the original expectations for the first quarter of 2020, due to the impact of the viral outbreak.
The company also announced last month that its executive officers would all reduce their salaries by varying degrees for six months. Regular bonuses and salary increases have also been postponed, chief financial officer Ran Bareket said in a Wednesday conference call with investors.
The actual impact proved to be less severe than the company had feared, according to CEO Scott Keeney. There were initially concerns about major supply chain disruptions in China, he said, but the Shanghai factory was able to return to full strength relatively quickly.
Supply chain disruptions and consumer demand problems did crop up as the virus spread across the globe, Bareket said, but both impacts were smaller than expected.
“Demand is holding up across most of the markets we serve,” Keeney said on the investor call.
Keeney said he didn’t have an exact number to compare with the $8 million loss estimate, but that the economic damage definitely proved to be lower than the company had forecast.
The growth in revenue was driven primarily by sales to the aerospace and defense market, Keeney said, which accounted for 39 percent of revenue in the quarter. nLIGHT’s other two big markets, microfabrication and industrial, both saw year-over-year declines.
The industrial market was down 12 percent year-over-year, Keeney said, but he attributed that in part to the impact of COVID-19-related business shutdowns in China, and said those conditions improved as the quarter progressed.
Microfabrication saw a 28 percent year-over-year drop, which Keeney said came down to limited market activity for the end products in that category such as cars and electronics. There are signs of positive movement on the electronics side, he said, due to the growth of 5G cell phone networks.
The ongoing impact of COVID-19 makes it more difficult to develop financial estimates, Keeney said, but he pointed to the aerospace and defense market as an area where the company can be confident that there will be little impact apart from possible supply chain disruptions.
“The budgets that drive that demand are not affected directly,” he said.
Looking to the second quarter, Bareket said nLIGHT expects to see $41-55 million in revenue, with a gross margin of 21-25 percent. Those estimates are calculated to account for possible disruptions from COVID-19, he said.
Local operations
Keeney also discussed the company’s recent acquisition of a corporate campus in Camas formerly owned by electronics company Sharp, which nLIGHT intends to eventually use as a new headquarters.
Keeney said nLIGHT was drawn to the site because it can provide clean room, office and manufacturing space all in one location, and it’s big enough to give the company room to grow.
“We see this facility as a unique asset in the local area,” he said.
nLIGHT has already begun moving to the new building, he said, although the process will likely happen in phases and the company hasn’t finalized a full timeline for the transition. The company also hasn’t decided yet whether it will keep using its current facility in Vancouver in some capacity, he said.
nLIGHT is considered an essential business, so its local operations haven’t been interrupted by Washington’s statewide stay-at-home order, although Keeney said the company has switched as many people as possible to remote work and is following social distancing guidelines for the remainder.
One other big disruption to both local and global operations has been the lack of business travel, he said, because the pandemic has rendered international trips all but impossible.
“I think you can get by,” he said, “but no business will be able to operate as well without meeting people face-to-face.”
